Worcester Business Journal

wbjournal.com | Novermber 27, 2017 | Worcester Business Journal 13 H E A L T H C A R E F O C U S Milford Regional Medical Center and affiliates, net income (loss), FY 2013-2017 Net income has declined for many hospitals in recent years, but Milford Regional appears to be rallying after posting a 2016 loss. Payor mix WIth a lower percentage of Medicaid patients, Milford's reimbursement rates are higher. Medicare 41% Blue Cross 19% Commercial 18% Medicaid 10% Harvard Pilgrim 9% Self Pay 2% Other insured 1% Payor type Percentage Source: Milford Regional Medical Center those to differ much from unaudited figures. "I've labeled it really as a remarkable turnaround year for us," Kelly said. Urgent care revenue But it wasn't just trimming that brought Milford Regional into the black. Revenue increased by about $13 million to $276.3 million, as the hospi- tal saw results from steps taken to increase volume. Hospitals rely on physician offices to drive volume for inpatient and outpa- tient hospital services, but since there's a shortage of primary care doctors, it's difficult to drum up new business. This year, doctors who had not been accept- ing new patients agreed to do so, in order to bring more people into the system. But the opening of three new urgent care practices in the Milford Regional service area was an even bigger boost, said Kelly. That allowed people who don't have primary care doctors to access the system, too. "I do credit a lot of our growth to the fact that more people could access our system," Kelly said. The three centers, in Milford, Northbridge and Hopkinton, opened in late 2016 and early 2017, in partnership with Tri-County Medical Associates, and that coincided with a spate of urgent care center openings across Central Massachusetts and Metrowest, where seven different hospital systems vying for volume view urgent care as a necessity to drive traffic. Independent streak Buoyed by new sources of volume, Kelly was hopeful Milford Regional will maintain its foothold as an independent community hospital, noting the hospital has important affiliations with large hos- pitals providing specialty care at the Milford campus, whenever possible. Milford built the Dana Farber/ Brigham and Women's Cancer Center across the street from the main hospital in 2008, leasing space to the renowned Boston-affiliated doctors, who provide robust cancer treatment services there. Milford Regional hosts a full-time Boston Children's Hospital pediatrician to see patients during office hours and in the emergency department. Milford also has deep ties to the UMass Memorial Health Care system, where patients needing higher-level care end up, and which provides spe- cialist services at Milford Regional. Like Milford, community hospitals in Central Massachusetts have leaders who want to see their organizations remain independent. But in 2017, it's difficult to go it alone as a healthcare system. Contracting with commercial insur- ers is more favorable for larger systems. Overhead is difficult for small hospi- tals, which struggle to implement expensive, state-of-the-art electronic records systems encouraging efficiency. The federal government puts pressure on payments, which, since 2013, has tied reimbursements for Medicare patient care to quality metrics, such as hospital readmission rates. In addition, the migration toward risk-based con- tracting requires hospitals to care for patients on a budget instead of on a fee-for-service patients. With changes in federal healthcare policy always looming, it's difficult for administrators to plan. M&A activity rising This pressure has led to a mass con- solidation of the healthcare industry across the U.S. According to the consult- ing firm Kaufman Hall, there were 102 merger-and-acquisition deals by U.S. healthcare systems in 2016, and 2017 may outpace last year, with 87 deals inked by the end of the third quarter. Kelly said it was premature to spec- ulate which hospital system Milford Regional would merge with, if neces- sary, saying the hospital has a special relationship with all of its affiliates. "We really just take it year to year, and do what we think is good for our community," he said. While small, community hospitals may struggle to stay independent, larger hospital operators desperately need them, in order to drive volume into their systems. Small hospitals often refer patients to larger hospitals with a wider array of specialty servic- es, and that's traffic that big hospitals rely on, especially since insurance plans often encourage people to seek services at lower cost, community hos- pitals when possible, driving volume away from larger players. Such is the case for UMass Memorial Medical Center in Worcester, an academic medical center with an intricate web of affiliations throughout Central Massachusetts are key to keeping the UMass Memorial system afloat. UMass Memorial owns two commu- nity hospitals outside Worcester, including HealthAlliance Hospital, with campuses in Leominster, Fitchburg and Clinton, and Marlborough Hospital. Beyond that, it has affiliations with the other inde- pendent systems, including Milford Regional, Heywood Healthcare and Harrington Healthcare. Keeping Milford close UMass Memorial CEO Eric Dickson said Milford Regional is unique when it comes to local community hospitals. Its geography keeps it protected from competition from other small hospi- tals, but it's pretty centrally located between Boston and Worcester, mean- ing it can choose to send patients to hospitals in either city, any has poten- tial merger partners in Boston as well as Worcester. The hospital's payor mix of commer- cial and federal payors is also more favorable than other local hospitals with higher percentage of Medicaid patients in their mix, meaning reim- bursements are lower. Dickson predicted if any community While taking a walk around Milford Regional, Kelly stopped and chatted with registered nurse Deb Carbary to discuss the goings-on of the facility. W "We really just take it year to year, and do what we think is good for our community." Edward Kelly, president and CEO, Milford Regional Medical Center $10M 2013 0 $2M $6M -$2M -$6M 2014 2015 2016 2017* $2.24M -$5.3M $7.4M $7.9M $8.8M *Unaudited Sources: Milford Regional Medical Center; Massachusetts Center for Health Information and Analysis hospital in Central Massachusetts can stay independent, it's Milford Regional. "Milford's the funny one, in that it's almost as close to Boston as it is to us," Dickson said. "We work hard to keep them close."

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